WWMD: What Will Microsoft Do?

Well, I can tell you what Microsoft might do if it ever got Yahoo to stop snubbing its efforts to acquire the troubled Internet portal.

According to numerous sources familiar with Microsoft’s thinking whom I have been talking to this past week, quite a lot–from creating a single search index to forming one common ad platform to running the place with longtime Microsoft execs at the helm.

So let’s just ignore for now the latest wrinkle in this obviously dysfunctional relationship between Yahoo and Microsoft–which is beginning to remind me of that bizarre Charlie Brown, Lucy Van Pelt and football situation.

That’s because once again (and, as it has apparently done over the last year secretly, until Microsoft finally went hostile 10 days ago), Yahoo’s board is expected to deliver another no-thank-you-very-much-for-now in answer to Microsoft’s latest bid–this time a $31-per-share offer.

Fine, fine. We all know this is going to grind forward agonizingly, as investment bankers parry and various scenarios are bandied about (including here in excess, we can assure you!).

And, of course, there will be possible other merger partners leaked. On today’s menu: AOL! Having written two books about the even-more-troubled-than-Yahoo Internet outfit, here is my official response: Yuck.

Thus, to be more helpful, it might be better to focus on some things that might happen if the software giant ever got the keys to Yahoo.

Let’s be clear–nothing has been formally decided by Microsoft brass as yet, but there are some interesting ideas to be found in the planning they did before they prepared the offer, which can give one an outline of their plan if they won.

It’s important to think about, because exactly what Microsoft would do to Yahoo is probably something that Yahoo’s board, executives, employees and others would probably like to get a sense of as it considers what it should do.

First, we already know Microsoft will keep the Yahoo brand name, per public declarations by Microsoft CEO Steve Ballmer. This is kind of a no-brainer, especially when it is compared to the lackluster MSN. (Historical footnote: The code name for MSN was Marvel, which was a much better moniker still!)

Most sources familiar with Microsoft’s thinking could not agree more. One noted that Yahoo was clearly the best brand, but said Microsoft would likely remain “open-minded about what happens to the rest of the MSN-branded names.” Expect Window Live products to have the best chance of survival.

Also on the PowerPoint slides, which Microsoft execs have only vaguely referred to as cost savings, is the consolidation of the search indexes and technology of Yahoo and Microsoft into one product. Signs lean toward Microsoft here, as some of its execs have even publicly insulted Yahoo’s efforts in this arena.

Frankly, neither should be bragging much, given how badly they both lag behind Google, but Microsoft is better equipped from an engineering and power programming point of view to dominate here.

That also goes for the consolidating of the ad platforms, both for search and display. Even though Yahoo dominates the display market, Microsoft considers its recent acquisition of aQuantive to be the driver of this arena, rather than Yahoo’s technology and new purchases like BlueLithium and Right Media.

In both the ad and search efforts, sources said that Microsoft would split engineers between those who work on improving and running the core existing products and another group who will be focused on pushing to incorporate new innovation.

That would include trying to figure out a recent project Yahoo is currently undergoing, which inside sources call a “lugubrious” overhaul of the technology related to its display business. It’s comparable to its ill-fated Panama search-ad fix, a multiyear project Microsoft would probably be inclined to want to make sure is staffed by its own execs.

In that regard, if Microsoft ever prevails, Yahoo better be prepared to meet the parents.

They will be running the Yahoo show and would include Microsoft execs, pictured here, such as:

Brian McAndrews, former aQuantive CEO and now Microsoft’s SVP of its Advertiser Publisher Solutions Group, who is a rising star and would surely play a key role in all ad efforts and coordination.

Satya Nadella, corporate vice president of its Search and Advertising Platform Group, the engineering head whom BoomTown will now dub, “Mr. Search and Destroy,” because he would likely lead all efforts to use Yahoo’s assets to catch Google. (Good luck with that one, Satya!)

Yusuf Mehdi, SVP of Strategic Partnerships, who has been in and out of the MSN businesses many times and is one of Microsoft’s better-known Internet execs outside the company, and who has played an important role in this bid.

And, of course, Kevin Johnson, president of Platforms and Services Division, who runs quite a swath of the company. Besides Ballmer, he is probably the most important player in this effort to turbocharge Microsoft with Yahoo power.

That is, except for Hank Vigil, SVP of Strategy and Partnership, who has worked closely with Ballmer on this deal and also big moves like the recent $240 million Facebook investment. Vigil is not high-profile in any way, but he feels a lot like Zelig in his clearly important presence in a lot of Microsoft’s more bold initiatives.

One major Web exec who will not be part of the hunting party is Steve Berkowitz, SVP of the Online Services Group, who is finally on the way out, as has been long rumored. Sources said his change of status as a major Web player at Microsoft has been communicated to many top execs at the company last week. But it is not clear whether the former Ask.com CEO will leave Microsoft or get another job at the company.

In fact, many a Microsoft Web exec has mysteriously disappeared into the bowels of the company, never to be seen again, so Yahoo execs: Beware!

Just as the atom bomb was the weapon that was supposed to render war obsolete, the Internet seems like capitalism’s ultimate feat of self-destructive genius, an economic doomsday device rendering it impossible for anyone to ever make a profit off anything again. It’s especially hopeless for those whose work is easily digitized and accessed free of charge.

— Author Tim Kreider on not getting paid for one’s work

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